Vodafone Idea sinks to 15-month low to funding woes

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Shares of Vodafone Idea Ltd dipped to a 15-month low on January 9 as reports said that the beleaguered telecom service provider had not been unable to secure funding from the government, banks or its promoters.

The stock hit a low of Rs 7.35 a share, a level last seen on September 7, 2021. At 12.06pm, the stock was trading at Rs 7.40 on the BSE, down 5.1 percent from its previous close. The stock has declined 23.32 percent in FY23 so far.

Recently, the firm sought at least Rs 7,000 crore emergency fund from local banks, according to a newspaper report.   The State Bank of India, Punjab National Bank, HDFC Bank and IDFC First Bank are among the banks that the telco approached. However, lenders could wait for either capital increase by its promoters —UK's Vodafone Plc and India's Aditya Birla Group, or debt equity conversion by the government.

"If a fresh capital infusion from Vi's promoters does not come by January-February, it will become difficult for the telco to survive", the ET report added. Moneycontrol could not independently verify the report.

Vi's promoters had earlier assured the government that they would invest around Rs 10,000 crore. The assurance had come shortly before the government finalised a telecom sector revival package in September 2021.

Telecom minister Ashwini Vaishnaw said on January 5 that conversion of equity alone would not solve the company's financial problems and it needed a capital injection from multiple sources. The telecom operator is reeling under a debt burden of over Rs 2 trillion.

"Vodafone Idea (VIL) is our key avoid in the sector, given significant leverage and continued market share losses. VIL has struggled to keep pace with 4G transitions with Jio and Bharti over the last three years. Its higher regulatory payouts from the judgment in the AGR case and higher spectrum outgo (post-moratorium) also limit its ability to invest in the network for coverage and capacity", said JP Morgan in its latest report.